Shearman & Sterling LLP | FinReg | HM Treasury and U.K. Regulators Publish Statement on Implementation Date for Prudential Reforms for UK Investment Firms
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  • HM Treasury and U.K. Regulators Publish Statement on Implementation Date for Prudential Reforms for UK Investment Firms

    HM Treasury has issued a joint statement with the U.K. Financial Conduct Authority and the Prudential Regulation Authority confirming a targeted implementation date of January 1, 2022 for the reforms to the prudential regulation of U.K. investment firms set out in the U.K. Financial Services Bill.

    The U.K. Government published the Financial Services Bill on October 21, 2020, setting out a proposed regulatory framework for the financial services industry following the U.K.'s exit from the EU. The U.K. has historically wished and repeatedly sought to impose higher capital requirements on banks and investment firms than the EU has accepted, in part driven by the better capitalization of U.K. banks compared to some EU institutions. The new legislation includes amendments to the U.K.'s prudential framework for financial services firms in order to: (i) implement aspects of Basel III that were implemented via the EU revised Capital Requirements Regulation but are yet to be implemented in the U.K.; and (ii) introduce an investment firms prudential regime in the U.K. that mirrors the EU's Investment Firms Regulation and Investment Firms Directive. In its June 2020 Policy Statement, HM Treasury announced that these aspects of the new prudential framework would be introduced in the U.K. by Summer 2021. However, following concerns raised by market participants about the volume of regulatory reform expected in 2021, the targeted implementation date has been delayed to January 2022.

    The U.K. also intends to implement Basel 3.1 through the Financial Services Bill. Basel 3.1 amendments are intended to restore credibility in the calculation of risk-weighted assets and improve the comparability of banks' capital ratios but have not yet been implemented in either the EU or the U.K. The Basel Committee for Banking Standards has delayed the deadline for implementation of Basel 3.1 until January 1, 2023, to allow firms to focus on tackling the challenges arising from COVID-19. The U.K. has welcomed this delay and intends to implement the Basel 3.1 standards in line with the revised 2023 deadline.

    View the joint statement.

    View details of the Financial Services Bill.

    View details of HM Treasury's Policy Statement on prudential standards for investment firms.

    View details of Basel Committee's delay to Basel 3.1.

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